Week ahead in Fx: Yellen speech, RBA and RBNZ

The US dollar was one the weakest currency last week, despite the dollar starting off on a firm footing on Monday. The dollar weakened sharply after Friday’s jobs report came out worse than expected to leave many to question whether the Fed will hike rates in June. This sent the US dollar to close Friday’s session at a 3-week low. The Pound Sterling also closed the week on a bearish note. Although this week was devoid of any Brexit opinion poll related news, the fundamentals were at play with the May PMI numbers coming out weaker than expected and clearly indicating that businesses were being impacted by the EU membership referendum uncertainty.

Weekly Spot FX Performance – 03/06/2016 (Source: Finviz.com)

Among the commodity-linked currencies, the Kiwi was the top performer last week rising 3.91%, while the Aussie managed to rise 2.53% against the US dollar. The yen was also stronger this week, rising 3.43% gaining as some BoJ officials spoke out against the central bank’s policies.

Fundamentals for the Week 06/06 – 10/06

Date

Time

Currency

Detail

Forecast

Previous

06-Jun

07:00

EUR

German Factory Orders m/m

-0.40%

1.90%

09:10

EUR

Retail PMI

47.9

09:30

EUR

Sentix Investor Confidence

7.1

6.2

17:30

USD

Fed Chair Yellen Speaks

07-Jun

05:30

AUD

Cash Rate

1.75%

1.75%

AUD

RBA Rate Statement

06:00

JPY

Leading Indicators

100.80%

99.30%

07:00

EUR

German Industrial Production m/m

0.80%

-1.30%

EUR

French Trade Balance

-4.2B

-4.4B

10:00

EUR

Revised GDP q/q

0.50%

0.50%

13:30

USD

Revised Nonfarm Productivity q/q

-0.60%

-1.00%

USD

Revised Unit Labor Costs q/q

4.00%

4.10%

15:00

CAD

Ivey PMI

54.2

53.1

USD

IBD/TIPP Economic Optimism

49.1

48.7

20:00

USD

Consumer Credit m/m

19.1B

29.7B

23:45

NZD

Manufacturing Sales q/q

-1.90%

08-Jun

00:50

JPY

Current Account

2.04T

1.89T

JPY

Final GDP q/q

0.50%

0.40%

JPY

Bank Lending y/y

2.20%

JPY

Final GDP Price Index y/y

0.90%

0.90%

02:30

AUD

Home Loans m/m

2.60%

-0.90%

Tentative

CNY

Trade Balance

358B

298B

Tentative

CNY

USD-Denominated Trade Balance

55.8B

45.6B

06:00

JPY

Economy Watchers Sentiment

43.4

43.5

08:15

CHF

CPI m/m

0.20%

0.30%

09:30

GBP

Manufacturing Production m/m

0.10%

0.10%

GBP

Industrial Production m/m

0.00%

0.30%

13:15

CAD

Housing Starts

194K

192K

13:30

CAD

Building Permits m/m

-7.00%

22:00

NZD

Official Cash Rate

2.00%

2.25%

NZD

RBNZ Rate Statement

NZD

RBNZ Monetary Policy Statement

09-Jun

00:00

NZD

RBNZ Press Conference

00:50

JPY

Core Machinery Orders m/m

-3.20%

5.50%

JPY

M2 Money Stock y/y

3.30%

3.30%

02:10

NZD

RBNZ Gov Wheeler Speaks

02:30

CNY

CPI y/y

2.30%

2.30%

CNY

PPI y/y

-3.10%

-3.40%

06:30

EUR

French Final Non-Farm Payrolls q/q

0.20%

0.20%

06:45

CHF

Unemployment Rate

3.50%

3.50%

07:00

EUR

German Trade Balance

21.4B

23.6B

JPY

Prelim Machine Tool Orders y/y

-26.30%

08:00

EUR

ECB President Draghi Speaks

09:30

GBP

Goods Trade Balance

-11.1B

-11.2B

13:30

CAD

NHPI m/m

0.30%

0.20%

CAD

Capacity Utilization Rate

81.50%

81.10%

USD

Unemployment Claims

270K

267K

15:00

USD

Wholesale Inventories m/m

-0.10%

0.10%

15:30

CAD

BOC Financial System Review

16:15

CAD

BOC Gov Poloz Speaks

10-Jun

00:50

JPY

PPI y/y

-4.20%

-4.20%

05:30

JPY

Tertiary Industry Activity m/m

0.70%

-0.70%

07:00

EUR

German Final CPI m/m

0.30%

0.30%

EUR

German WPI m/m

0.20%

0.30%

07:45

EUR

French Industrial Production m/m

0.50%

-0.30%

10th-15th

CNY

M2 Money Supply y/y

12.60%

12.80%

10th-15th

CNY

New Loans

750B

556B

09:00

EUR

Italian Industrial Production m/m

0.30%

0.00%

09:30

GBP

Construction Output m/m

1.50%

-3.60%

GBP

Consumer Inflation Expectations

1.80%

13:30

CAD

Employment Change

1.1K

-2.1K

CAD

Unemployment Rate

7.10%

7.10%

15:00

USD

Prelim UoM Consumer Sentiment

94.1

94.7

USD

Prelim UoM Inflation Expectations

2.40%

Time: GMT+1

Currencies/Events to Watch this Week

AUD: The Australian central bank will be meeting on June 7th where expectations are that the central bank will be standing pat on policy, given the rate cut just last month in May. With an upbeat GDP in the first quarter, the RBA could maintain its accommodative stance but also re-iterate that it would be watching inflation expectations in the near term. Besides the RBA decision, consumer confidence from Westpac and home loans are other details to look forward to.

NZD: The Reserve Bank of New Zealand will be meeting for its monetary policy review on June 8th. While earlier expectations were for a rate cut, the changing economic landscape in New Zealand is now giving conviction that the RBNZ could hold off a rate cut at its meeting this week. The main premise behind this view is the fact that with higher oil prices and the New Zealand budget which is now expected to increase infrastructure spending, thus raising construction prices and excise duty on tobacco products all point to a potential increase in New Zealand inflation expectations. Holding off a rate hike at this week’s meeting will no doubt increase speculation for a rate cut in August.

JPY: Japan’s GDP will be once again in focus, but the final estimates are unlikely to point to any surprises. Japan’s first quarter GDP was recorded at 0.40% while the annualized GDP was recorded at 1.70%. With the BoJ’s meeting on the agenda the week later, the yen could be seen taking a back seat this week.

CNY: China will be released its export/import data alongside the trade balance numbers. Expectations are for exports to rise 1.70%, offsetting the previous month’s decline of 1.80%, while imports are expected to fall 7% following at 10.90% decline in May. Inflation numbers will be closed watched, due out on 9th June. In April, China’s annualized inflation was recorded at 2.30%, while producer price index was seen at -3.40%. Expectations for this week is for inflation to rise at a subdued pace of 2.20%, and PPI is expected to moderate its declines, falling 3.30%.

EUR: Data from the Eurozone this week will be limited to the first quarter final GDP report. No change is expected, confirming that the eurozone economy grew at a pace of 0.50% in the first quarter of this year while posting annualized GDP growth rate of 1.50%. German industrial production and factory orders are also due this week and expected to show some moderation following last month’s strong gains.

GBP: Data from the UK is relatively soft with only the industrial and manufacturing production numbers being the main event to watch for. Industrial production is expected to extend its declines, falling 0.20% for April, posting declines at the same pace as in March on a year over year basis. On a month over month basis, industrial production is expected to rise 0.20%. Manufacturing production is expected to remain flat on a month over month basis while showing a moderate decline of 1.20% on a year over year basis. Trade balance numbers are up on Thursday, June 9th.

CAD: A busy week for Canada starts from Tuesday’s Ivey PMI, which is expected to rise to 54.2 in May, up from April’s 53.1. Building permits and housing starts data will also be coming up this week. On Friday, Canada will be reporting its monthly labor market data. The unemployment rate is expected to hold steady at 7.10% while the net employment change in May is expected to rise a modest 0.9k.

USD: Fed Chair, Janet Yellen will be speaking at an event in Philadelphia on Monday and the markets will be watching her comments. Another FOMC voting member, Rosengren will also be speaking a few hours later. Data from the US this week is relatively quiet for the remainder of the week with only the weekly jobless claims and the UoM consumer confidence being the other major events to look forward to.

John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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